WEST virginia legislature
2017 regular session
to the Committee on
A BILL to amend the Code of West Virginia, 1931, as amended by adding thereto a new article, designated §29-25A-1, §29-25A-2, §29-25A-3, §29-25A-4, §29-25A-5, §29-25A-6, §29-25A-7, §29-25A-8 and §29-25A-9, all relating to legalizing interactive gaming; providing legislative findings; establishing licensing requirements; limiting licensing to existing gaming facilities; providing that the Lottery Commission regulate interactive gaming; providing operations controls; providing prohibitions and criminal penalties; assessing gaming and licensing fees; incorporating rules and statutes applicable to interactive gaming; and providing a tax and administration of the tax for operation of an interactive gaming license.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new article, designated §29-25A-1, §29-25A-2, §29-25A-3, §29-25A-4, §29-25A-5, §29-25A-6, §29-25A-7, §29-25A-8 and §29-25A-9, all to read as follows:
Article 25A. Authorized interactive gaming.
§29-25A-1. Legislative findings.
(1) The Legislature finds and declares that interactive gaming permitted by this article constitutes the operation of lotteries within the purview of section thirty-six, article VI of the Constitution of West Virginia;
(2) That legalization of video lottery and table games in West Virginia has delivered substantial benefits to the state, including the creation of thousands of significant contributions to racing and agricultural industries;
(3) Developments in technology and recent legal decisions have created an opportunity to legalize interactive poker as a means to further enhance and complement the benefits delivered by casino gaming and licensed facilities to or for the benefit of the communities in which they operate;
(4) Interactive gaming operates by having players establish and draw funds from an individual account to place a wager in authorized games through the Internet and similar communications media. The state currently authorizes gaming in the form of video lottery and table games. These gaming operations provide licensed entities the appropriate level of experience to introduce a platform for interactive gaming that protects the player and the integrity of the lottery games;
(5) It is a vital public interest that licensed entities retain responsibility for the interactive gaming software and hardware which shall remain under their ultimate operational and supervisory control of the state. To ensure that actual control and supervision remains with the licensed entity, the licensed entity's publicly accessible Internet website or similar public portal shall be marketed and made available to the public under the licensed entity's own name and brands and not the brands of third parties;
(6) Any interactive gaming enforcement and regulatory structure shall begin from the premise that participation in a lawful and licensed gaming industry is a privilege, not a right and that regulatory oversight is intended to safeguard the integrity of the games and participants and to ensure accountability;
(7) The state has entrusted the control and regulation of gaming to the Lottery Commission. It is therefore appropriate to delegate the responsibility for the implementation and regulation of interactive gaming to the commission; and
(8) Authorized interactive gaming, once fully developed, will allow persons in this state to participate in interactive games, not only with other persons in this state, but with persons in other cooperating jurisdictions in the United States where interactive gaming has been authorized.
The following words and phrases when used in this chapter have the meanings given to them in this section unless the context clearly indicates otherwise:
(a) "Authorized game" means any interactive racetrack, video lottery or interactive table game approved by the commission pursuant to this chapter.
(b) "Authorized participant" means a person placing a wager who is either physically present in this state or located in a jurisdiction with which the state has negotiated an interactive gaming agreement. The intermediate routing of electronic data in connection with interactive games may not determine the location or locations in which a wager is initiated, received or otherwise made.
(c) “Commission” means the West Virginia Lottery Commission established pursuant to article twenty-two of this chapter.
(d) "Interactive game" means any game offered through the use of communications technology that allows a person, utilizing money, checks, electronic checks, electronic transfers of money, credit cards, debit cards or any other instrumentality, to transmit to electronic information to assist in the placing of a wager and corresponding information related to the display of the game, game outcomes or other similar information. The term does not include the conduct of gaming that occurs entirely among participants located within the licensed facility of the licensee or its affiliate, to the extent that any such gaming may be authorized by the commission, or nongambling games that do not otherwise require a license under the laws of this state. For purposes of this definition, "communications technology" means any method used and the components employed by an establishment to facilitate the transmission of information, including, but not limited to, transmission and reception by systems based on wire, cable, radio, microwave, light, optics or computer data networks, including, but not limited to, the Internet and intranets.
(e) "Interactive gaming agreement" means a negotiated agreement between the state and one or more of the states or territories of the United States in which interactive gaming is legally authorized that permits persons located in such other jurisdictions to place wagers on interactive games with licensees in this state or to permit persons located in this state to place wagers on interactive games with licensees in such other jurisdictions, or both. Agreements may contain other provisions the commission considers appropriate, except that only authorized games may be permitted to be offered to persons located in this state pursuant to an agreement.
(f) "Interactive gaming license" means a license issued by the commission pursuant to this chapter which authorizes the holder to offer authorized games for play by, and to accept bets and wagers associated with authorized games from, authorized participants.
(g) "Interactive gaming platform" means the combination of hardware and software designed and used to manage, conduct or record interactive games or the wagers associated with those games and which has been approved by the commission for purposes of the conduct of authorized games.
(h) "Interactive gaming skin" means the portal to an interactive gaming platform or Internet website through which an authorized game is made available to customers in this state.
(i) "Internet" means a computer network of interoperable packet-switched data networks.
(j) "Key interactive gaming employee" means an individual employed by a licensee, significant vendor or applicant, or by a holding or intermediary company of a licensee, significant vendor or applicant, who is involved in the operation of, or of the wagers associated with, interactive gaming and who is empowered to make discretionary decisions that regulate interactive gaming operations.
(k) "Licensee" means a authorized gaming facility licensed pursuant to articles twenty-two-c and twenty-five of this chapter.
(l) "Poker" means any of several card games traditionally known as poker, in which players compete against each other and not against the person operating the game, including a game using an electronic device that simulates a deck of cards. The term includes cash games and tournaments. Licensees may assess a rake or any other type of fee associated with the game, contest or tournament but may not wager with or against any player.
(m) "Significant vendor" means a person who offers or proposes to offer any of the following services with respect to interactive gaming:
(1) Management, administration or control of wagers or of the interactive games themselves;
(2) Development, maintenance, provision or operation of an interactive gaming platform or any discrete component thereof;
(3) Sale, licensing or other receipt of compensation for selling or licensing a database or customer list of individuals residing in the United States selected, in whole or in part, because they placed wagers or participated in gambling games with or through an Internet website or operator or any derivative of such a database or customer list;
(4) Provision of any product, service or asset to a licensee or significant vendor in return for a percentage of interactive gaming revenue, not including fees to financial institutions and payment providers for facilitating a deposit or withdrawal by an authorized participant; or
(5) Provision of any trademark, trade name, service mark or similar intellectual property under which a licensee or significant vendor identifies to customers the authorized games, the website or equivalent hosting the authorized games, any interactive gaming skin or the interactive gaming platform, but excluding intellectual property of a person providing only art or graphics.
The term does not include any key interactive gaming employee of a licensee or significant vendor. A significant vendor must be licensed by the commission to provide these services.
(a) The commission shall propose rules for legislative approval in accordance with article three, chapter twenty-nine-a of this code, for the operation and conduct of interactive gaming pursuant to this article: Provided, That the rules promulgated by the commission that are necessary to begin the lottery games are exempt from the provisions of chapter twenty-nine-a of this code in order that the selected games may commence as soon as possible.
(b) The commission shall authorize licensees and significant vendors to conduct interactive gaming at gaming facilities as established pursuant to article twenty-five of this chapter. The commission shall also develop standards for evaluating and approving interactive gaming platforms for use with interactive gaming. The commission may determine the categories of employees who satisfy the definition of "key interactive employee" and may exclude from the scope of this definition any particular licensee, significant vendor, applicant or employee or category of employee it considers appropriate.
(c) The commission may negotiate and enter into interactive gaming agreements on behalf of the state consistent with this article.
(d) To the extent practicable, the commission shall negotiate interactive gaming agreements with other states, territories or possessions of the United States in which interactive gaming has been authorized to allow players in this state to participate in authorized games with players in such other jurisdictions.
§29-25A-4. Prohibition on unauthorized Internet gaming; criminal penalties.
(a) It is unlawful for any person to willfully and knowingly operate, carry on, offer or expose for play or to knowingly or willfully provide services for any interactive game or to accept any bet or wager associated with any interactive game from any person physically located in this state at the time of the play that is not within the scope of a valid and current license issued by the commission pursuant to this chapter or by another state, territory or possession of the United States with which the state has an interactive gaming agreement that permits that activity. It is unlawful for any person to willfully and knowingly provide services with respect to any interactive game, bet or wager:
(1) For a first violation of subsection (a), a person is guilty of a misdemeanor and, upon conviction thereof, shall be fined not less than $75,000 nor more than $150,000 or confined in jail not more than one year, or both fined and confined;
(2) For a second or subsequent violation of subsection (a), a person is guilty of a felony and, upon conviction thereof, shall be fined not less than $150,000 nor more than $300,000 or imprisoned in a state correctional facility not less than one nor more than three years, or both fined and imprisoned.
(b) An unlicensed person offering interactive games to persons in this state is liable for all taxes required by this chapter in the same manner and amounts as if that person were a licensee. Timely payment of the taxes does not constitute a defense to any prosecution or other proceeding in connection with unauthorized interactive gaming, except for a prosecution or proceeding alleging failure to make such payment.
Ninety days from the effective date of this section, the commission shall permit filing of applications for licenses pursuant to this article by entities currently licensed by article twenty-five of this chapter.
Current gaming facilities, whose licenses to offer video lottery games and table games are in good standing, are suitable to be issued an interactive gaming license by the commission. An applicant that was not licensed as an authorized gaming facility pursuant to article twenty-five of this chapter or did not hold a valid racing license granted by the Racing Commission prior to January 1, 1994, pursuant to the provisions of article twenty-three, chapter nineteen of this code is not eligible for a license. Within sixty days of entry of the commission's order granting a license, the successful applicant shall pay a licensing fee of $50,000.
Each interactive gaming license applicant shall submit to the commission and department, in such manner as the commission requires, a description of its administrative and accounting procedures in detail, including its written system of internal control. In addition to other such standards that the commission may choose to require. The commission shall require licensees to implement appropriate safeguards:
(1) To ensure, to a reasonable degree of certainty, that authorized participants are not less than twenty-one years of age;
(2) To ensure, to a reasonable degree of certainty, that authorized participants are physically located within this state or such other jurisdiction that is permissible under this chapter;
(3) To protect, to a reasonable degree of certainty, the privacy and online security of authorized participants;
(4) To ensure, to a reasonable degree of certainty, that the interactive games are fair and honest and that appropriate measures are in place to deter, detect and, to the extent reasonably possible, to prevent cheating, including collusion and use of cheating devices, including the use of software programs, sometimes referred to as "bots," that make bets or wagers according to algorithms;
(5) To minimize compulsive gambling and to provide notice to authorized participants of resources to help problem gamblers; and
(6) To ensure authorized participants' funds are held in accounts segregated from the funds of licensees and otherwise are protected from corporate insolvency, financial risk or criminal or civil actions against the licensee.
§29-25A-8. Taxes on gaming activities.
(a) The tax rate which shall be assessed and collected by the commission with respect to any wagers placed by residents of this state with an interactive gaming operator outside of this state, but authorized pursuant to an interactive gaming agreement, are governed by the agreement but may not exceed fourteen percent of gross interactive gaming revenue derived from residents of this state.
(b) Each licensee shall report to the department and pay from its daily gross interactive gaming revenue, on a form and in a manner prescribed by the department, a tax of fourteen percent of its daily gross interactive gaming revenue, which shall be payable to the department on a weekly basis and shall be based upon gross interactive gaming revenue for the previous week.
§29-25A-9. Applicable gaming facility laws and rules apply.
If federal law authorizes interactive gaming which establishes a tax based on gross interactive gaming revenue, deposits or the substantial equivalent of or intended substitute for either of them, of which a portion is allocated to the states, that tax shall supersede, in its entirety, the tax imposed by this section. All moneys collected pursuant to this article shall be deposited in the account created in created section twenty-two, article twenty-five of this chapter: Provided, That moneys collected from an authorized gaming facility shall be deposited in the account created in section twenty-two, article twenty-five of this chapter. The commission shall establish by rule and maintain minimum internal control standards that incorporate any applicable rules and statutes regulating gaming facilities necessary to effectuate the provisions of this article.
NOTE: The purpose of this bill is to authorize Internet gaming managed and licensed through existing authorized gaming facilities in West Virginia.
Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.